Jobs and Incomes Strategy Update, 20201

Strengthening the private sector to drive economic growth is one of the five objectives of NDP III (2021-2025). The Private Sector Development Program of NDP III is expected to achieve the strengthening of the private sector through operationalizing several Government Strategies, notably the Industrialization Strategy based on agro-processing industries, the Small and Medium Enterprises Strategy, the Financial Sector Strategy, and the National Physical Development Plan.

Over NDP I & II, Government has implemented a wide range of investment climate reforms and front-loaded a significant level of essential infrastructure in the Transport, Energy and ICT sectors. These sustained efforts are yet to yield a significant improvement in the contribution of investment to GDP growth. The Investment-to-GDP ratio2 over the NDP I & II increased from 27.1% in FY 2010/11 to 27.9% in FY 2012/13 before declining to 25.7% in FY 2018/19. This ratio needs to rise to at least 30% by 2030 given Uganda's demographic outlook and current per-capita income trajectory. This calls for economic growth in the second decade of Vision 2040 (2021 to 2030) to be investment- driven and productivity-centered.

The Private Sector Development programme of NDP III will accelerate the economic transformation of Uganda’s economy, aiming to generate higher levels of jobs to match the pace of labor force growth, which is expected to generate half a million new entrants annually between 2020 and 2030. The program will increase the competitiveness of Ugandan exports (reflected by higher prices of export products and penetration of higher value export markets); increase the value addition and income growth in Ugandan supply chains, leading to higher incomes for farmers and small businesses; and unlocking the potential of high growth, emerging industrial clusters.

The strategy of the new program rests on recent evidence confirming that economic growth in Uganda has been characterized by enterprise growth along a southern corridor which approximately follows along the the Malaba-Kampala-Katuna highway. It is also along this corridor that we have the sub-regions with the lowest share of households engaged in subsistence agriculture and the highest share of households in middle income status (Kampala-Buganda-Ankole). This convergence of desired development outcomes is confirmation that the principle of growth corridors has been effective in generating employment and income generating opportunities within a spatial context.

Under NDP III, Government will expand the principle of growth corridors to drive development from the current one growth corridor (the Southern Corridor) to two additional growth corridors (the Eastern Corridor and the Albertine Corridor) thereby forming a growth triangle. This growth triangle will be anchored around three Manufacturing Hubs (Gulu; Mbarara and Mbale) that are each reinforced by a number of primary production centres located in the surrounding sub-regions. The Eastern growth corridor will follow the current Meter Gauge Railway line that runs across Bukedi- Bugishu-Teso-Lango-Acholi sub-regions (with a spur to West Nile and Karamoja) while the Albertine growth corridor will run across Kigezi-Toro-Bunyoro sub-regions.

With a focus on strengthening the linkage between Jobs and Investment, the Private Sector Development program of NDP III will:

1. This Draft: October, 2019. Prepared by the Economic Development Policy and Research Department, Ministry of Finance, Planning and Economic Development
2. GDP in current prices using rebased GDP series (2016/17)

1. Prioritise industrial growth along the Growth Triangle through the development of the 22 industrial parks identified by Government, where access to infrastructure, logistics, and government services can be effectively accessed by investors. This will lead to the reduction in lead time to setting up factories in Uganda and connecting farmers to sustainable markets. The priority industrial parks for the Eastern Corridor include the parks in Tororo, Mbale, Soroti, Lira and Gulu (and eventually Arua), while those of the Albertine Corridor include parks in Kasese and Hoima. The planned National Science and Technology Parks by MoSTI will also be integrated with the Growth Triangle strategy.
2. Utilize the Growth Triangle to guide the extension of utilities and transport networks as envisioned in NDP III and recently approved by Cabinet. Where feasible the strategy will include maximizing private finance for development in critical infrastructure projects, to reduce the burden on budget resources and also leveraging the public resources and capability.
3. Connect Public Investment Management (PIM) at the sub-national level to Area-wide Specific Sub-Regional Economic Development (ASSURED) frameworks. This will specifically involve consolidating the different on-going economic interventions across the country around specific anchor supply chains and clusters embedded in the respective sub-regions, as well as incorporating the implementation of the Public Investment Management for Agro-industry (PIMA) strategy. NPA will follow up the NDP III with specific sub-regional development plans to bridge macro and micro economic outcomes.
4. Improving the efficiency and deepening of financial markets through the de-risking of investments in productive, high-growth segments, particularly agro-processing supply chains, transformational infrastructure developments, and housing. This will entail supporting innovative solutions to the provision of longer-term finance – encompassing both formal financial markets and private, unquoted markets – particularly with a view to strengthening agricultural value-chains. Fundamental to achieving the deepening of financial markets and making long-term finance more affordable will be containing the Government’s borrowing needs and thereby ‘crowding-in’ private sector financing.
5. Reinforce the UPE and USE programmes by elevating a few schools per sub-region into Centres of Excellence, and bench mark their performance management and learning outcomes to establish the baseline for evaluation framework. This principle will also be extended to large urban centres (Kampala and secondary cities) to eliminate traffic congestions arising from families crisscrossing the city daily to shuttle children to good performing schools.

Supporting high growth supply chains by improving the performance and coordination of public institutions and Government agencies that are critical to the attraction of transformative private investments in Uganda. Improving the coordination between research/skills training institutions and the private sector, to incubate new technologies and operating platforms, and scale their application through commercialization. Streamlining effective Business Development Services, to support competitive industry cluster formation under a single national delivery and performance framework, including the activities of the Uganda National Chamber of Commerce and Industry, Private Sector Foundation Uganda and the Commercial Departmen